BILL INTRODUCTION WORK SESSION

Oregon State
Treasury.Provides additional
background information (EXHIBIT B)
regarding LC 19-1.States that the
information in the exhibit assumes $200 million in proceeds and a five-year
maturity.

059

Chuck Smith

Oregon State
Treasury.Says that the cost of funds
would be an interest rate of 3.87 percent, and the transaction would produce
$200 million in net proceeds.Reviews
the expected issue and maturity dates.Mentions that the measure includes a reserve fund that could be used
to make the payment in the final year

089

Rep. Shetterly

Asks whether the
calculation of the cost of funds includes more than just the cost of
issuance.

092

Smith

Clarifies that the
calculation does take into account the $263 million being borrowed.

095

Rep. Shetterly

Wonders what the effective
interest rate is on the amount being borrowed.

099

Smith

Answers that the calculations
include the total cost only.

107

Richardson

Adds that the average
remaining revenues is anticipating the debt service related to Oregon Health
and Sciences University (OHSU).

110

Rep Johnson

Asks whether that amount
is the $17 million referenced in the exhibit.

112

Richardson

Replies affirmatively.

116

Smith

Confirms that the original
calculation was increased to $17 million to ensure that enough money is
available to pay for the debt service.

123

Rep. Morgan

Asks whether there is any
way to determine the costs if the original proceeds were to be increased by
$50 million.

125

Smith

Replies that the effect
would be to extend the calculations by a year, with corresponding costs.

136

Rep. Bates

Inquires whether it would
be possible to pay off the bonds in a shorter amount of time if the amount
borrowed was substantially reduced.

144

Smith

Concedes that it is easier
to calculate upward, and says that there must be access to cash flow, which
will not be available until the next biennium.

150

Rep. Bates

Concludes that it would be
prudent to pay off the bonds over five years, regardless of the amount
borrowed.

152

Smith

Acknowledges that the
calculations utilize the optimal format for short-term financing.

156

Rep. Shetterly

Asks how many states have
done similar MSA settlement arrangements and the maximum amount of proceeds
any state has sought.

161

Smith

Responds that nine states
have made such arrangements, with the largest being Wisconsin’s $1.6 billion.

175

Rep. Shetterly

Wonders whether there is a
point past which the debt management does not work.

191

Smith

Replies that most of the
tobacco transactions have been relatively large in size, to maximize market
reception, meaning that scaling down too far results in proportionally higher
interest rates.Submits that an
amount of $35 million would be too low, while $250 million is reasonable.

197

Rep. Bates

Asks if it would be
reasonable to remove $100 million from the issuance.

205

Rep. Morgan

MOTION:Moves LC 19-1 BE INTRODUCED as a committee
bill.

209

VOTE:7-0

Chair
Westlund

Hearing no
objection, declares the motion CARRIED.

217

Paul Warner

Provides a brief
explanation of LC 26 (EXHIBIT C),
which proposes a temporary increase in personal income tax rates.Indicates that the draft has no provision
for a ballot referral.

235

Rep. Devlin

Indicates that his vote to
introduce the measure does not represent either support or opposition to the
measure once it returns to the committee for consideration.

247

Paul Warner

Notes that the measure
deals with the issue of insufficient withholding.

252

Rep. Bates

MOTION:Moves LC 26 BE INTRODUCED as a committee
bill.

256

Chair Westlund

Reiterates that support
for the motion does not imply that members will support the measure on future
motions.

Reconvenes the meeting at
12:29 p.m. Opens a public hearing on HB 4073.

HB 4073 PUBLIC HEARING

288

Chair Westlund

Closes the public hearing
on HB 4073 and opens a work session onHB 4073.

WORK SESSION – HB 4073

306

Rep. Shetterly

Notes that the measure
still retains the blanks and asks if the committee is prepared to amend the
measure conceptually to fill them.

320

Dick Yates

Legislative Revenue
Office.Provides a brief overview of
HB 4073, which provides a structure for a public corporation for MSA assets
and authorizes the sale of the payments to the corporation, which in turn
will borrow an as-yet undetermined amount to be paid into the State School
Fund.Indicates that the measure
would require approximately 77 percent of MSA funds.Indicates that the measure specifies the
method for appointing members to the corporation.

354

Rep. Hayden

Requests clarification as
to where the measure specifies that the cash flow reverts to the state after
the bonds are repaid.

363

Yates

Replies that the reference
is on page 3, line 45.

376

Rep. Hayden

Wonders why the language
is permissive.

380

Yates

Answers that there are
other reasons that could cause the dissolution of the corporation.

TAPE 21, A

008

Rep. Hayden

Asks whether the cash flow
could be used for other purposes once the bond obligation is taken care of.

013

Yates

Replies affirmatively.

026

Rep. Hayden

Wonders whether the MSA
corporation could be made into a standing corporation and receive funds for
other purposes at a later time.

030

Yates

Responds that HB 4073
specifies that the funds are to be designate to the State School Fund.

034

Rep. Hayden

Requests confirmation that
dedicating the funds to another entity in the future would require a
statutory change.

038

Yates

Explains that there are
other issues to take into account, including maintaining the tax-exempt
status of the bonds.

046

Harrison Conley

Legislative Counsel Office.Comments on maintaining the tax-exempt
status of the bonds and says that the measure offers only a portion of the
payments of the MSA to pay for the bonds and for operating costs of the
corporation.

065

Rep. Shetterly

Asks whether the
corporation could be classified as a trustee of the funds.

075

Conley

Replies that there may
soon be an amendment limiting the corporation to the rights and duties
contained in the measure.

080

Kate Richardson

Oregon State
Treasury.Indicates that amendments
are being drafted that clarify what the corporation is and is not authorized
to do.

088

Chair Westlund

Asks when the amendments
will be ready.

089

Conley

Answers that the
amendments will be drafted within a matter of hours.

092

Richardson

Emphasizes the complexity
of the language.

115

Rep. Bates

Says that there is a
possibility that an amendment will be brought forth for a bonding amount $100
million less than the current amount and asks that preparations be made for
such an amendment.

122

Richardson

Comments that the maturity
length is tied to the specific amount and says that some cushion may be
necessary due to the volatility of the MSA payments.

135

Rep. Morgan

Requests confirmation that
the amount and payback schedule is necessary to prepare the amendments.

139

Richardson

Clarifies that it is
necessary to know the net proceed in order to set the maturity date to a time
that will be most advantageous for the state.

143

Conley

Explains the process for
changing the maturity date.

149

Chair Westlund

Clarifies that the amount
is assumed to be $250 million.

161

Rep. Johnson

Reiterates that additional
amendments may make a request for $100 million less.

178

Chair Westlund

Closes the work session on
HB 4073 and opens a public hearing on HB 4074.

HB 4074 WORK SESSION

Requests confirmation that
the measure makes permanent the cuts to county fairs.

252

Weyand

Replies affirmatively.

257

Chair Westlund

Echoes the concerns of
Rep. Johnson and urges committees not to focus on the permanence of
reductions within the package, as the 2003 Legislature will have the
opportunity to revisit the adjustments.

273

Rep. Johnson

Responds that many
sacrifices have been made in many areas and subscribes that the cuts will not
necessarily be permanent.

280

Chair Westlund

Reminds committee members
that the budget team was under a great deal of pressure to produce a budget
package in a short amount of time.

292

Weyand

Notes that the measure, if
passed, addresses only the budget rollup.

300

Chair Westlund

Concurs, reiterating that
the decisions in this regard were made in a very short time frame.

330

Rep. Shetterly

MOTION:Moves to ADOPT HB 4074-2 amendments dated 9/10/02.

334

VOTE:7-0

Rep. Morgan

Hearing no
objection, declares the motion CARRIED.

366

Rep. Shetterly

MOTION:Moves HB 4074 to the floor with a DO PASS
AS AMENDED recommendation.

370

VOTE:7-0

Rep. Morgan

Hearing no
objection, declares the motion CARRIED.

REP. HAYDEN
will lead discussion on the floor.

378

Chair Westlund

Closes the work session on
HB 4074 and opens a public hearing onHB 4076.

HB 4076 PUBLIC HEARING

386

Chair Westlund

Closes the public hearing
on HB 4076 and opens a public hearing on HB 4078.

HB 4078 PUBLIC HEARING

TAPE 20, B

002

Rep. Johnson

Asks whether amendments
drafted for this bill will be considered by the committee and whether the
chair would be willing to recess until the amendments are ready.

005

Chair Westlund

Agrees to entertain
amendments, provided that they are available in a timely manner.

012

Rep. Johnson

Asserts that the measure
and any amendments should be given a timely debate on the subject.

018

Ozzie Rose

Confederation of School
Administrators (COSA).Inquires about
the total revenue raised by HB 4078.

023

Paul Warner

Legislative Revenue
Officer.States that HB 4078 raises
$395 million in the 2001-03 biennium, as well as language directed to
under-withholding and surtaxes on corporate and excise taxes that are not
part of the $395 million, meaning that the total revenue impact would be
approximately $407 million for the 2001-03 biennium.

043

Rep. Shetterly

Asks whether there are
committee amendments to the measure.

050

Warner

Replies that no amendments
have been submitted for the measure.Notes that some of the issues that were to be amended into HB 4076 are
included in HB 4078.Adds that the
other amendments prepared for HB 4076 could be conceptually amended into HB
4078.

071

Rep. Morgan

Concludes that there are
three issues for which there are potential amendments:

Two years or three years

Revenue neutrality for personal income tax

Corporate income tax adjustment

080

Warner

Mentions that the revenue
impact is comparable for the three options.

083

Rose

Testifies in support of HB
4078. Requests that the measure
remain a three-year surcharge.Expresses hope that the measure will not be referred to voters.

130

Chair Westlund

Discusses potential
changes that could be made to HB 4078 if and when it moves to the Senate.

150

Rep. Shetterly

Agrees with the three-year
concept and asks whether Mr. Rose would prefer a February or March 2003
election to a November or December 2002 election.

155

Rose

Responds that he would
prefer that the legislature pass the measure without a referral to voters.

164

Rep. Shetterly

Counters that the
political reality is that it will be referred to voters, either by the
legislature or by referendum.

179

Rose

Explains that the measure
should include a stipulation that if it is brought to the ballot by referral
the election will take place in February or March 2003.

185

Chair Westlund

Remarks that Legislative
Counsel has determined that February 11th is the earliest the
measure could appear on the ballot.

195

Rep. Bates

Recalls a discussion of
significant conceptual amendments to the measure and asks whether those
amendments will be made prior to the measure being moved to the floor.

204

Rep. Morgan

Submits that there were
amendments that could be included in the measure should the committee decide
to do so.

208

Rep. Bates

Mentions that alternative
amendments could be included at that time.

212

Chair Westlund

Asserts it is time to get
things done in the Senate.

216

Rep. Bates

Expresses a lack of
confidence in the Senate’s willingness to entertain the amendments in question.

223

Rep. Deborah Kafoury

House Democratic
Leader.Testifies in support of HB
4078 and requests that the measure be left in its current form.Asserts that a straight up vote is the
only responsible action.

245

Rep. Hayden

Asks whether Rep. Kafoury
would support a December election.

248

Rep. Kafoury

Reiterates that a straight
up vote is preferable to a December election.Acknowledges that an earlier election is no longer viable.

259

Rep Shetterly

Wonders why Rep. Kafoury
prefers a February election to a December election.

266

Rep. Kafoury

Comments that neither is
substantially better than the other.Asserts that the legislature is charged with fixing the budget
situation and says that it should take proactive action to do so.Comments that voters are less likely to
support the measure in December than in February.

279

Rep. Devlin

Asserts that the only
thing lacking in HB 4078 is a backup date in the event that it is referred to
voters.

286

Rep. Kafoury

Indicates that she has had
drafted amendments to HB 4075 that would address the concerns regarding a
backup date.

295

Chair Westlund

Acknowledges the
amendments could be made conceptually.

298

Kafoury

Reiterates her desire to
pass the measure without amendments.

302

Rep. Shetterly

Takes exception with Rep.
Kafoury’s assertion that December is not a good time to propose a tax
increase and says there is no such thing as a good time to ask voters to
increase taxes.Asserts it is
preferable to have the question settled before March 2003.

331

Rep. Kafoury

Restates her belief that
the measure stands a better chance if it is passed without a referral.Assures that the Democratic caucus did not
make this decision lightly.Requests
confirmation that the committee will vote only on hard-copy amendments.

355

Chair Westlund

Confirms that the process
remains the same.

364

Rep. Kafoury

Requests an opportunity to
testify on the other measures before the committee.

370

Rep. Hayden

Requests confirmation on
the magnitude of the entire tax measure that is to be referred to voters.

375

Warner

Answers that the total to
be raised by the measure is $934 million over three biennia.

TAPE 21, B

004

Rep. Bates

Asks whether the measure
will be going out in its current form.

007

Chair Westlund

Asserts that it will
likely go out with a request for either $395 million or $407 million.

014

Rep. Kafoury

Testifies in support of HB
4073, so long as the total borrowing does not exceed $100 million, adding
that her vote on that measure is part of a compromise to complete a package. Testifies
that HB 4075 should be amended to set up a special election in February in
the event of a referendum on HB 4078.Expresses opposition to HB 4076 and expresses preference for HB 4078.Says that with regard to HB 5100 it is not
necessary to have a cut level above $50 million.

040

Chair Westlund

States that there is a
willingness on the part of the Republicans to come to a compromise solution
as well.Remarks that budget
reductions cannot be voted on until the revenue measures are resolved.

050

Rep. Shetterly

Clarifies that there is a
difference of $150 million in borrowing with regard to HB 4073.

063

Governor John Kitzhaber

Testifies in opposition to
the budget reconciliation package under consideration.Expresses concern about borrowing money
against future revenue streams to pay for current budget shortfalls, adding
that there is over $800 million in one-time revenues already in the current
budget.Mentions the two tax
proposals under consideration and endorses a straight-up vote on the tax
proposal, as opposed to a referral, which would be doomed to failure without
a voter’s pamphlet explanatory statement.Downplays the assertion that the measure will be put on the ballot by
referendum, adding that the same was said about the Measure 88
deferment.Warns that the other
options available are hard choices. Warns of the possibility that decisions made now could worsen
the budget situation next session.

135

Chair Westlund

Disagrees respectfully
with the Governor’s opposition to the bonding piece of the proposal.Asserts that the real solution to the
problem will be developed during the 2003 Legislative Session.Argues that cuts, borrowing, and revenues
will all be part of the final solution.Maintains that whatever solution is developed now can only make the
situation for next session a little better or a little worse, but cannot
solve it altogether.

169

Governor Kitzhaber

Responds that the
legislature has the opportunity to increase the likelihood of success for
next session’s efforts.

180

Chair Westlund

Recalls negotiations that
have occurred to resolve the problem.

193

Rep. Shetterly

Expresses agreement that
borrowing is not necessarily good fiscal policy but says the situation is
dire enough to warrant it.Asserts
that the borrowing under consideration is preferable to the long-term cost of
restoring programs later.Concludes
that the issue of a ballot referral is one of tactics, rather than strategy,
and says that the opposition must be taken into account.

242

Governor Kitzhaber

Argues that if the
legislature believes that the revenue is necessary then it should not make it
easier for opponents to defeat it by placing it on the ballot for them.Says that the opposition should be made to
work to defeat the measure.

252

Rep. Devlin

Comments that borrowing
for present needs is a drastic step to take, but says the current situation
warrants it.

275

Governor Kitzhaber

Responds that the
borrowing may be beneficial today, but given the budget circumstances may be
threatening the long-term health of the very programs that the legislature
seeks to protect.

296

Rep. Shetterly

Asks how the different
election dates being considered would affect the cuts to be made by the
executive branch, should the tax proposal fail at the ballot box.

301

Governor Kitzhaber

Responds that the effect
of the cuts becomes more magnified the later into the biennium they are
made.Comments that the primary
factors that will weigh on opponents will be the potential effects of the
cuts and the likelihood of success at the polls.

312

Rep. Bates

Expresses thanks to the
Governor for taking on this challenge. Says that most forecasts do not
foresee economic success similar to the past several years.Asks what level the state should consider
for bonding.

333

Governor Kitzhaber

Responds that paying off
the borrowing sooner rather than later is preferable.Adds that deeper bonding ought to be
accompanied either by more revenue or deeper cuts.

361

Rep. Bill Witt

House District 28.Submits the -8 amendments (EXHIBIT E) to HB 4076 and requests
that those amendments be applied to HB 4078. Provides a brief overview of the
amendments, which would increase the 9-percent personal income tax bracket to
9.5 percent for three years, while leaving the other two brackets as they
are.Says the proposal would bring in
$303 million this biennium.Asserts
that a tax increase of over $400 million stands less of a chance for success
than does his proposal.

TAPE 22, A

034

Paul Warner

Legislative Revenue
Officer.Indicates that he does not
have the specific numbers available.

038

Rep. Witt

Indicates that the -8
amendments would raise $303 million during the remainder of the 2001-03
biennium and $382 million for the 2003-05 biennium.Asserts that those funds, combined with responsible bonding and
targeted spending cuts, would close the budget gap.

047

Chair Westlund

Requests that Rep. Witt
provide hard copies of the numbers to the committee as soon as possible.States his intention to move one version
or another of the bill to the floor by the end of the day.

059

Sen. Rick Metsger

Senate District 26.Testifies regarding to his concerns
related toHB 4078.Asserts that the proposal as written
imposes a significant tax hardship on those currently at the federal poverty
level.Opines that the amendments
provided by Rep. Witt appear to address his concerns in this regard.Proposes imposing a surcharge only on
people with incomes in excess of $20,000/year.

089

Rep. Westlund

Asks whether Sen. Metsger
would support a proposal that avoids taxing people at low income levels.

092

Sen. Metsger

Answers that such an
amendment would do much to gain support among the Democratic caucus.

097

Rep. Bates

Mentions there has been a
discussion of setting the floor at $50,000 as opposed to $20,000, and
imposing a higher burden on the upper income brackets, by increasing the top
rate to 9.75.Asks whether Sen.
Metsger would support such a proposal.

102

Sen. Metsger

Concludes that both
concepts are similar, in that they do not place the burden upon those who
have been hit hardest by the recession.

112

Bob Cantine

Association of Oregon
Counties (AOC).Indicates that AOC
has sought a balanced package for closing the budget gap and says that this
process has done so.Expresses a concern
that the final solution should not impose a disproportionate impact on any
one part of the system.

152

Chair Westlund

Closes the public hearing
and opens a work session on HB 4078.

HB 4078 WORK SESSION

Comments regarding the
procedure for discussing HB 4078 concurrently with HB 4076.Opines that Rep. Witt was correct to
question why the proposal raises more taxes than are needed to fill the
budget hole.Solicits opinions from
the committee on that issue.

200

Rep. Hayden

Asserts that the
legislature should deal solely with the specific problem of the current
budget deficit in this biennium.Asserts that there is no way to know what situation the next
legislature will face.

220

Rep. Devlin

Asks that the remaining
members of the committee be present before taking action on the measure.

Requests that the
committee take action on HB 4075 prior to voting on HB 4078, so as to provide
a date-certain for a potential ballot referral or referendum. Asks for testimony from the Secretary of
State Elections Division on the issue as well.

278

Chair Westlund

Closes the work session on
HB 4078 and opens a public hearing onHB 4075.

Restates the question of
what date could be selected for the measure as the election date in the event
of a successful referendum on the measure.

357

John Lindback

Director, Elections
Division, Secretary of State’s Office.Requests clarification as to whether the date will be for a specific
referral or for a referendum.

362

Rep. Bates

Replies that he is
interested in the latter.

379

Rep. Shetterly

Adds the additional issue
of whether it is possible to refer the measure to the ballot in December
2002.

381

Lindback

Indicates that February 11th,
2003 is the soonest that a referendum could take place.States that there are logistical problems
for a December election, taking place so soon the November 5th
General Election, but says there are no legal impediments to doing so.

TAPE 23, A

012

Rep. Devlin

Asks when the effective
date would be for a February 11th election date.

015

Ted Reutlinger

Legislative Counsel
Office.Answers that the effective
date would be thirty days following the election, at which time the results
would be officially certified.Adds
that this is the case with either the referral or referendum scenarios.

021

Rep. Devlin

Concludes that there would
be nothing prohibiting a state agency from beginning the process of amending
forms and other preparations based upon the election results.

025

Reutlinger

Concurs, absent some
statute specifically prohibiting such action.

031

Rep. Shetterly

Asks whether the
Department of Revenue would prepare the forms based upon election results.

042

Susan Browning

Department of Revenue.Responds that the department is currently
in the process of working on next year’s booklet, but could nevertheless
adjust to either a December or February election date.

054

Chair Westlund

Asks how early tax filers
would be accommodated in the event of a February 2003 election.

057

Browning

Answers that the current
tax rate would be used, with information to taxpayers about the new tax
rate.Says the department would also
encourage delaying filing until after the election.

069

Rep. Bates

MOTION:Moves to AMEND HB 4075, inserting a
requirement that in the event of a successful referendum on the measure the
election be held on February 11, 2003.

086

Rep. Hayden

Asks what cash flow
problems might be created by encouraging filers not to file for six weeks.

090

Browning

Answers that the majority
of revenues are collected through tax withholding, meaning that there would
be little effect on the revenue stream.

096

VOTE:7-0

Chair
Westlund

Hearing no
objection, declares the motion CARRIED.

101

Chair Westlund

Closes the work session on
HB 4075 and opens a work session onHB 4078.

HB 4078 WORK SESSION

155

Rep. Devlin

MOTION:Moves to AMEND HB 4078, by inserting the
-5

amendments (EXHIBIT F) to
HB 4076, minus lines 1-4

and other language applying to the 6.93%
rate, and

such language as necessary to conform them
to the

measure.

175

VOTE:7-0

Chair
Westlund

Hearing no
objection, declares the motion CARRIED.

201

Rep. Bates

MOTION:Moves HB 4078 to the floor with a DO PASS
AS AMENDED recommendation.

230

Rep. Shetterly

Indicates that there are
other sections of the amendments and the measure that will need to be changed
in order to achieve the desired effect.

254

Chair Westlund

Declares the previous motion withdrawn.

270

Rep. Shetterly

MOTION:Moves to AMEND the HB 4078 by replacing
sections 6, 7, 8, and 9 of the measure with lines 6-22 of the -5 amendments
to HB 4076.

289

VOTE:7-0

Chair Westlund

Hearing no
objection, declares the motion CARRIED.

291

Rep. Bates

MOTION:Moves HB 4078 to the floor with a DO PASS
AS AMENDED recommendation.

VOTE:5-2

AYE:5 - Bates, Devlin, Johnson,
Shetterly, Westlund

NAY:2 - Hayden, Morgan

Chair
Westlund

The motion
Carries.

REP. BATES
will lead discussion on the floor.

304

Rep. Shetterly

States that his vote was a
courtesy to move the measure to the floor.

315

Chair Westlund

Closes the work session on
HB 4078 and opens a public hearing onHB 4076.

HB 4076 PUBLIC HEARING

324

Chair Westlund

Closes the public hearing
and opens a work session on HB 4076.

HB 4076
WORK SESSION

330

Rep. Devlin

Asks whether the corporate
tax changes made to HB 4078 are included in HB 4076 in its current form.

334

Warner

Replies that the measure
does not contain the updated language.

336

Rep. Devlin

MOTION:Moves to ADOPT lines 6-22 of the HB 4076-5
amendments.

338

VOTE:7-0

Chair
Westlund

Hearing no
objection, declares the motion CARRIED.

382

Warner

Provides an explanation of
the -3 amendments (EXHIBIT G) to HB 4076.

390

Rep. Devlin

MOTION:Moves to ADOPT HB 4076-3 amendments dated.

398

VOTE:7-0

Chair
Westlund

Hearing no
objection, declares the motion CARRIED.

403

Rep. Westlund

MOTION:Moves HB 4076 to the floor with a DO PASS
AS AMENDED recommendation.

TAPE 22, B

018

VOTE:4-3

AYE:4 - Hayden, Morgan, Shetterly,
Westlund

NAY:3 - Bates, Devlin, Johnson

Chair
Westlund

The motion
Carries.

REP.
WESTLUND will lead discussion on the floor.

022

Rep. Devlin

Posts notice that his vote
may change on the floor.

024

Rep. Johnson

Posts notice that her vote
may be different on the floor.

034

Speaker Mark Simmons

Speaker of the House.Outlines the strategy for moving the
measures to the floor of the House of Representatives.